LNK - Link Administration Holdings

[System]

Link Group administers financial ownership data for over 2,300 clients globally servicing an underlying stakeholder base which includes over 10 million superannuation account holders and over 20 million individual shareholders.

Link Group has approximately 4,300 employees and operations in 11 countries.

It is anticipated that LNK will list on the ASX in late October 2015.

http://www.linkgroup.com

 

[JTLP]

Oof. Link given a good old whack on some earnings revisions. Brexit isn’t helping and some remediation to do.

Looks like it’s back to IPO levels, worthy of a punt? Revenue slightly ahead of 2018 but profit down.

 

[peter2]

I've posted a monthly chart of LNK since the IPO. It's interesting that the three largest bars are all down.

 

[peter2]

@Miner Here's the Link thread. I think you searched the incorrect section.

 

[Miner]

@Miner Here's the Link thread. I think you searched the incorrect section.

Thanks Pete @peter2

 

[Miner]

Reproducing a link from Motley Free website - copyright does not apply to be a free for all.
However, always use all kinds of filter to skim the real news from Motley Fool published information.
https://www.fool.com.au/2019/07/05/...r-another-fall-on-neil-woodford-fund-blow-up/
If you are busy to read all of the report then please read the extracted section;
" It is now being alleged the manager got round rules capping unlisted holdings at no more than 10% of the fund through some sleight of hand investments on the Guernsey stock exchange that LFS permitted.
I expect if these allegations are proven the FCA will come down like a tonne of bricks on Link Fund Solutions Limited and its directors.

For its part, Link maintained in its June 18 announcement that it still considers LFS “has acted at all times in accordance with applicable rules and in the best interests of investors” over the Woodford Fund affair.

LFS is also only a small part of Link’s business, but the regulatory risk alone is enough to put me (this refers to the writer of MF ) off buying Link shares today."

 

[Faramir]

Did anyone buy Link roughly three months when it dropped. Today it went up 9.37% to $5.37. I was dreaming about buying some shares during the past two weeks but three things stopped me:
1): No funds
2): Over the past month, I was nervous or should I say no idea what the Annual Report would say today???
3): I thought I had vague idea about Link Administration. I even kept a newspaper cut out of their PEXA acquisition last November. I think better study LNK more - I really don't understand it.

Point 2): I always have troubles biting the bullet!

Today I admit I felt FOMO when I was dreaming about entering between $4.60 and $4.80. There were opportunities over the past month.

Here is the press release.
https://www.asx.com.au/asxpdf/20190829/pdf/447zn1z3rddh50.pdf

NPAT up 123% to $320 million
Net operating cash flow $339 million, up 6%

Is that profit influenced by the sale of CPCS? No wonder I should read Cash Flow Statements first. The lack of quality input in this post shows that I need more research time. I just need more time. Something must be OK if there is up to 10% share buy-back.

Someone, please add some quality. Thanks.

 

[Value Hunter]

I am against investing in any share registries. Because to me they are all dinosaur business models with which have not generated any innovation in over 20 years. Dealing with share registries is an annoyance to most shareholders with so much duplication in filling out forms, etc and the process is totally un-streamlined and not user friendly. To me the industry seems ripe for disruption and share registries operating exactly the same way as 20 years ago just is not going to cut it and it I do not think the current situation will last in the long-term. Just like banks are getting disrupted by various fintechs, Wechat, Applepay, etc and credit card companies are getting disrupted by companies like Afterpay eventually all these dinosaur share registry companies will get disrupted also. They seem incredibly complacent in my view.

Now I understand that there are regulations about privacy and data security but they can be addressed and in a rational world shareholders would not deal with share registries directly as they would only be operating invisibly at the backend. Shareholders would provide all details once to the stock exchange e.g. the ASX who would then create a profile for that person and share the information with share registries (upon the person ticking a box giving consent for this). The investor would then log in their profile on the ASX and manage everything from there (and the ASX would then have their systems linked to share registries and seamlessly pass on the data). This makes far more sense than for example an investor who owns 30 stocks having accounts with 8 different share registries. I could not think of a more idiotic system than the one we currently have.

In a similar vein online stock broking desperately needs some innovation also.

Basically part of the problem is that the ASX has a near monopoly in the Australian share market and therefore has had no incentive to get its s-h-i-t together and ensure that investing (from an administrative perspective) is a hassle free and seamless process for investors.

 

[galumay]

Why are there multiple registries? There must be services they provide to the public companies that results in some competition? Otherwise it surely would just be a function provided by the ASX? (If the only purpose were shareholder comms.)

Also thinking aloud, they must provide some value to the public companies because that is there only source of revenue, and they appear to be profitable businesses.

The craziest thing about the whole investing process is the huge mountains of paperwork it generates, I could close my PO Box just about, if it were not for the thousands of letters from share registries! As someone who runs a totally paperless company its mindboggling in this day and age that people still operate in this way.

 

[Value Hunter]

Galumay mountains of pointless paperwork indeed......

 

[Faramir]

@Value Hunter and @galumay Thank you for your input. All this time I never thought about Compuserve, BoardRoom (and others that I cannot think of on a Saturday night.)

Unless Link can reinvent itself and disrupt itself, then I have to agree with ValueHunter.

My eyes have certainly been opened up. Maybe not biting the bullet is a good trait in this instance.

(PS: Still dreaming of that short term trade but I had no idea things would react after the release of Annual Report - I wish I had hindsight.)

To play devils advocate, could I argue that Government Regulation will give more time with Share Registries to ‘adapt’? I know you said dinosaurs. Also PEXA acquisition is a new kettle of fish for Link.

I am looking for positive aspects. Not because I want to invest, I just want to know why I was seriously considering LNK. Was I thinking in terms of being a contrarian? Or looking for a turn around? Something attracted me to LNK.

 

[galumay]

I have never looked at LNK, its outside my circle of competence. I just had a glance at the AR and other than the debt it doesnt look too bad. I would have guessed a back of the envelope range of valuation around $6.

I actually think VH was more saying he would like registries to be disrupted rather than saying he thinks its a present risk. Disuption doesnt always play out in favour of the disrupter either, sometimes it leads to improvements in the incumbent and they win, or its a win win.

I think you need to look at the other players in the field and see where LNK sits as a business, no point in buying the 2nd or 3rd best business in the sector if you dont have a high conviction that they can change their rating.

Just buying the business because the price has dropped is not a strategy that is likely to succeed in the long term! Its all very well being contrarian, but you have to have an insight that means you start contrarian but eventually the market agrees with you!

In saying all of that, LNK may well be a great buy at current prices, I have no view one way or the other.

 

[Smurf1976]

The craziest thing about the whole investing process is the huge mountains of paperwork it generates

For most investors it's even worse since apart from the physical paper issue, it's completely unnecessary paperwork anyway and would still be pointless if sent by email.

In reality though if companies have to use a registry then it could still be a worthwhile investment despite what seems to be an antiquated business model.

 

[bigdog]

ASX announcement today which market liked and share price currently up 10.79%

31/01/2020 8:46:10 AM Presentation of Business Unit Realignment & AASB 16 Leases
https://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=02197243

LINK reported the acquisition of Pepper European Servicing for an upfront cash payment of €165 million (A$266 million). The deal includes a contingent cash payment of up to €35 million (A$56 million). Management expects the transaction to be double digit accretive to earnings, with a further 5% to 6% accretion anticipated from efficiency benefits over the medium term.

359

 

[finicky]

LNK @ 3.60 today

For a potential buyer of more share there's recently been some interesting activity on the LNK register:

Soon after reporting its H1 results on 27 Feb three directors of LNK bought large amounts on market. One director (chairman) bought on two consecutive days, spending not far shy of $1m.

On Mar 10 Vanguard Group announced it had raised its substantial holding in LNK by 1%.

Also the company since Mar 10 has been announcing daily share buy backs.

 

[dyna]

Here I go again(must be somewhere near the bottom,by now? What have those yanks done to their market overnight?)...Anyway,bought $5 grand worth of Link,just now, for $3.25.

 

[Dona Ferentes]

Private equity funds Carlyle Group and Pacific Equity Partners have lobbed a $2.8 billion bid for Link Administration.

Perpetual, which owns 9.65 per cent, says it will support the $5.20 a share conditional and non-binding indicative offer for the funds administration platform and 44.2 per cent owner of property setttlements platform PEXA. Perpetual support of a bid of at least $5.20 stands in the absence of a superior offer and will expire after six months.

Link says shareholders should take no action. The stock last traded at $3.99 a share.

 

[kenny]

Didn't see this, thanks @Dona Ferentes. Perhaps the start of consolidation in registry and shareholder management services businesses?

From a Sentiment article;


The conditional offer has been put together by a consortium comprising of Pacific Equity Partners, Carlyle Group and their affiliates, which are seeking to acquire 100% of Link Group, most commonly known as one of the largest share registry operators in the world.

Perpetual, which holds 9.65% of Link Group, has confirmed they will be voting in favour of the takeover.

With this non-binding indicative proposal being the first news to Link shareholders, the Company has advised its shareholders not to take any action in response to the proposal whilst Macquarie Capital and UBS have been engaged as financial advisers.

Link Group and Pacific Equity Partners are very well acquainted with PEP having floated Link on the ASX in 2015 at $6.37 per share before they sold their shares less than 12 months after listing, at $8.38.

Prior to the bid, Link was trading with a market capitalisation of $2.12 billion with the takeover bid valuing the Company at $2.76 billion.

Through FY20, Link reported $1.23 billion in revenue which was down on the $1.4b the year prior. Earnings also took a hit with $294m EBITDA down from $395m.

 

[kenny]

LNK is interesting to me for it's 44.2% exposure to the PEXA platform through its holding company; Torrens Group Holdings Pty Ltd. PEXA is the online conveyancing platform that was meant to IPO itself before being sold by PEP to a consortium that included Link, Morgan Stanley Infrastructure Partners and CBA back in 2018 for $1.6 billion .

The proposal also includes an alternative to let shareholders keep the company’s PEXA business unit through an offer of shares instead of cash or a rollover of existing shares alongside the consortium. Details are vague on how that affects the $5.20 headline offer.

Worth reading this AFR article; https://www.afr.com/street-talk/big-banks-show-the-way-on-link-s-pexa-20201014-p564vs

 

[Dona Ferentes]

Link Administration has confirmed that PEXA will undertake an initial public offering and list on the ASX in June.

Link said that following a cornerstone bookbuild process, it had signed an underwriting agreement for the purposed of an IPO of PEXA.

The underwritten price of the IPO implies an enterprise value for PEXA of $3.3 billion.

The Link Group board unanimously concluded that retaining exposure to Link’s interest in PEXA, whilst also realising a transparent valuation through a listing and flexibility to monetise its interest over time, was in the best interests of shareholders.

“This is an outstanding outcome for the shareholders of Link Group,” said Link chief executive and managing director Vivek Bhatia.

“In October 2020, the Link Group board considered that the private equity consortium’s bid for Link Group, including its interest in PEXA, significantly undervalued Link Group’s business including the PEXA asset.

“This has been now demonstrated through the book build undertaken on Friday valuing PEXA at $3.3 billion, representing an increase of approximately 70 per cent on the consortium’s implied valuation of PEXA at $1.95 billion.”